(By Anthony Miller). There are two ways to face a downturn: roll over and let it do its worst to your business; or meet the challenges head on and fight back. Fidessa chose the latter strategy and is scoring well on points. Despite (in fact, because) its products sit right at the centre of the financial crisis, Fidessa saw FY08 revenues grow 33% (proforma, constant currency) to £189m though operating margins trimmed 40 bps to 11.9% (see here). However, if you exclude its recent £1m patent dispute settlement, margins tricked up 10 bps to 12.4%, and that still includes the £0.6m Lehman’s write-off. Among the regions, Asia (13% revenues) was most profitable (43% segment margin), with Europe (50% revenues) least so (14.8% segment margin). North American segment margins were 20.4%, the only region which showed a gain (2007: 17.3%).What seems to have helped Fidessa weather the storm is that it has multiple plays in trading systems, with business lines that address the buy-side, the sell-side, the provision of market data, and network connectivity. In addition, recurring revenues now comprise 77% of the total (2007: 72%), among the highest in the software sector. But of course Fidessa is feeling some pain; smaller customers are increasingly taking workstation-based solutions and pricing is under pressure. It’s also seeing a pick-up in its hosted (SaaS) models as customers look for other ways to reduce operating costs. However, so far Fidessa has only seen small impact on buying cycles and management believes that the very factors that are causing the financial markets turmoil will be just the factors that drive client need for its products. We think management have done an excellent job in sailing Fidessa forwards despite considerable headwinds, and we hope they long continue to do so.
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